EXHIBIT 10.16


 


COAL LOADING, TRANSPORT, AND DELIVERY
AGREEMENT


 


This “Agreement” between Tersteeg Transport Inc. (“Tersteeg”) located
at 110 1st St. North Olivia, MN 56277 and Heron Lake BioEnergy, LLC
(“HLBE”) located at 91246 390th Avenue, Heron Lake, MN is valid as
of April 1, 2007.  The term of this
Agreement shall be contingent upon the execution of, and coincide with, HLBE’s
other five-year coal Agreements which will terminate no sooner than December 31,
2011 and no later than April 1, 2012, provided that Tersteeg performs in
accordance with this Agreement.


 


HLBE is constructing a coal-fired ethanol facility (“Facility”) in
Heron Lake, MN that is expected to become operational in mid-May 2007 and
that is expected to require approximately 100,000 tons of coal per year at full
output.  HLBE has contracted for coal
deliveries to Southern Minnesota Beet Sugar Cooperative’s (“SMBSC”) facilities
near Renville, MN and shall expect Tersteeg to load, transport, and deliver
HLBE’s coal from such location to HLBE’s Facility at Heron Lake, MN in
accordance with its requirements, which shall be regularly communicated to
Tersteeg.


 


Tersteeg operates a trucking and heavy machinery business in Minnesota
as an independent contractor and regularly has loading equipment and personnel
on-site at SMBSC’s Renville facilities. 
Tersteeg has familiarized itself with SMBSC’s facilities and HLBE’s
Facility, their respective operational requirements, potential haul routes,
weather, truck laws and weight limit regulations in Minnesota, and on the basis
of such information and other information, has agreed to load, transport, and
deliver HLBE’s coal for a base rate of $9.00 per ton at an assumed diesel fuel
price of between $2.406-$2.470 per gallon. 
Such rate shall be subject to (1) one annual 3% increase on the
anniversary date of this Agreement and (2) adjustments for changes in the
price of diesel fuel posted by EIA for each billing period in accordance with
Attachment A, which shall also be subject to an annual 3% increase.


 


By this Agreement, HBLE commits to having Tersteeg load, transport, and
deliver all of HLBE’s coal requirements to its Facility, but is making no
representation or warranty as to its actual annual coal requirements.  HLBE agrees to make required payments to invoices
submitted by Tersteeg in two week intervals on a 15 day net basis. If HLBE
fails to make a payment on scheduled due date, interest on payment shall accrue
at 1% per month billed twice per month.


 


Tersteeg shall load and haul coal in compliance with all applicable
federal, state, and local laws and regulations. Tersteeg is responsible for
having “clean trucks” free from any foreign material. Tersteeg agrees to
maintain an adequate supply of coal at HLBE’s Facility sufficient for HLBE’s
operational requirements.  Tersteeg shall
be responsible for HLBE’s coal in transit and any losses incurred during the
time it is in Tersteeg’s possession, including any clean-up costs. Tersteeg
shall maintain sufficient cargo liability coverage to protect Heron Lake BioEnergy
from losses incurred in transportation of coal to the HLBE facility.  Tersteeg shall maintain a minimum of 50%
supply in the storage tank at all times. The only exception to this requirement
would be adverse weather lasting more than three (3) consecutive days
allowing no travel.


 

















 


HLBE agrees to compensate Tersteeg for detention time in the event that
mechanical defects at HLBE’s Facility won’t allow Tersteeg to unload coal
within forty-five (45) minutes at arrival at such Facility.  Detention time for such occurrences shall be
charged at a “Detention Rate” of $25.00 per hour for the time documented by
Tersteeg for each truck at HLBE’s Facility waiting to dump coal.  Such Detention Rate shall be subject to an
annual 3% increase at the anniversary date of this Agreement.  In the event that Tersteeg is directed by
HLBE to return loads to SMBSC’s facilities due to mechanical defects at HLBE’s
Facility, there shall be no extra charge to return. The total cost of this trip
will stay @ the regular delivery charges.


 


In the event that Tersteeg is directed by HLBE to deliver loads of coal
to alternate sites, the rates for such deliveries will be mutually agreed upon
between the parties prior to making those deliveries.


 


Tersteeg agrees to defend, indemnify, and
hold harmless HLBE and its employees and officials from any claims, demands,
actions or causes of action, including reasonable attorney’s fees and expenses
rising out of any act or omission on the part of Tersteeg, or its
subcontractors, partners or independent contractors or any of their agents or
employees in the performance of or with relation to any of the work or services
to be performed or furnished by Tersteeg or subcontractors, partners, or
independent contractors or any of their agents or employees under the
agreement.


 


As evidence of required coverage, Tersteeg
shall furnish an original Certificate of Insurance to HLBE before work
commences.  The Certificate should include a minimum 90-day written notice
of intent to cancel, suspend or reduce coverage.  The Certificate should
identify HLBE as an Additional Insured for relevant coverages, except Workers
Compensation.  Insurance should be placed with a current A.M. Best
rating of no less than A: Class Size VII. 
Tersteeg Transport Inc. shall maintain a minimum of $1,000,000 of
commercial general liability and automobile coverage for the duration of this
contract.


 


In the event that HLBE is dissatisfied with service provided by
Tersteeg, it shall have the right to terminate this Agreement with five (5) days
notice, provided that Tersteeg has been notified of HLBE’s concerns and has had
sufficient reasonable time to implement measures to correct such deficiencies
to HLBE’s satisfaction.


 


 


	
  /s/ Alan M. Tersteeg

  	
   

  	
  /s/ Robert J. Ferguson

  
	
   

  	
   

  	
   

  
	
  Tersteeg Transport, Inc.

  	
   

  	
  Heron Lake BioEnergy, LLC

  
	
   

  	
   

  	
   

  
	
  Alan M. Tersteeg, President

  	
   

  	
  Robert J. Ferguson, President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Board of Governors

  
	
   

  	
   

  	
   

  
	
  Date:

  	
  4/3/07

  	
   

  	
  Date:

  	
  4/6/07

  
	
   

  	
   

  	
   

  
	
  Witnessed by:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Peggy Tersteeg

  	
   

  	
  /s/ Jean M. Ferguson

  
	
   

  	
   

  	
   

  
	
  Date:

  	
  4/3/07

  	
   

  	
  Date:

  	
  4/6/07

  
							



 

















 


Attachment A: 
Rate Schedule for Changes in Diesel Fuel Prices


 


	
   

  	
   

  	
  RATE CHARGED TO HLBE ($ /TON)

  	
   

  
	
  EIA AVG COST

  PER GALLON

  	
   

  	
  YEAR 1

  	
   

  	
  YEAR 2

  	
   

  	
  YEAR 3

  	
   

  	
  YEAR 4

  	
   

  	
  YEAR 5

  	
   

  
	
  1.431 -1.495

  	
   

  	
  $

  	
  8.10

  	
   

  	
  $

  	
  8.34

  	
   

  	
  $

  	
  8.59

  	
   

  	
  $

  	
  8.85

  	
   

  	
  $

  	
  9.12

  	
   

  
	
  1.496 - 1.560

  	
   

  	
  $

  	
  8.16

  	
   

  	
  $

  	
  8.40

  	
   

  	
  $

  	
  8.66

  	
   

  	
  $

  	
  8.92

  	
   

  	
  $

  	
  9.18

  	
   

  
	
  1.561- 1.625

  	
   

  	
  $

  	
  8.22

  	
   

  	
  $

  	
  8.47

  	
   

  	
  $

  	
  8.72

  	
   

  	
  $

  	
  8.98

  	
   

  	
  $

  	
  9.25

  	
   

  
	
  1.626 - 1.690

  	
   

  	
  $

  	
  8.28

  	
   

  	
  $

  	
  8.53

  	
   

  	
  $

  	
  8.78

  	
   

  	
  $

  	
  9.05

  	
   

  	
  $

  	
  9.32

  	
   

  
	
  1.691 - 1.755

  	
   

  	
  $

  	
  8.34

  	
   

  	
  $

  	
  8.59

  	
   

  	
  $

  	
  8.85

  	
   

  	
  $

  	
  9.11

  	
   

  	
  $

  	
  9.39

  	
   

  
	
  1.76 - 1.820

  	
   

  	
  $

  	
  8.40

  	
   

  	
  $

  	
  8.65

  	
   

  	
  $

  	
  8.91

  	
   

  	
  $

  	
  9.18

  	
   

  	
  $

  	
  9.45

  	
   

  
	
  1.821 - 1.885

  	
   

  	
  $

  	
  8.46

  	
   

  	
  $

  	
  8.71

  	
   

  	
  $

  	
  8.98

  	
   

  	
  $

  	
  9.24

  	
   

  	
  $

  	
  9.52

  	
   

  
	
  1.886 - 1.950

  	
   

  	
  $

  	
  8.52

  	
   

  	
  $

  	
  8.78

  	
   

  	
  $

  	
  9.04

  	
   

  	
  $

  	
  9.31

  	
   

  	
  $

  	
  9.59

  	
   

  
	
  1.951 - 2.015

  	
   

  	
  $

  	
  8.58

  	
   

  	
  $

  	
  8.84

  	
   

  	
  $

  	
  9.10

  	
   

  	
  $

  	
  9.38

  	
   

  	
  $

  	
  9.66

  	
   

  
	
  2.016 - 2.080

  	
   

  	
  $

  	
  8.64

  	
   

  	
  $

  	
  8.90

  	
   

  	
  $

  	
  9.17

  	
   

  	
  $

  	
  9.44

  	
   

  	
  $

  	
  9.72

  	
   

  
	
  2.081 - 2.145

  	
   

  	
  $

  	
  8.70

  	
   

  	
  $

  	
  8.96

  	
   

  	
  $

  	
  9.23

  	
   

  	
  $

  	
  9.51

  	
   

  	
  $

  	
  9.79

  	
   

  
	
  2.146 - 2.210

  	
   

  	
  $

  	
  8.76

  	
   

  	
  $

  	
  9.02

  	
   

  	
  $

  	
  9.29

  	
   

  	
  $

  	
  9.57

  	
   

  	
  $

  	
  9.86

  	
   

  
	
  2.211 - 2.275

  	
   

  	
  $

  	
  8.82

  	
   

  	
  $

  	
  9.08

  	
   

  	
  $

  	
  9.36

  	
   

  	
  $

  	
  9.64

  	
   

  	
  $

  	
  9.93

  	
   

  
	
  2.276 - 2.340

  	
   

  	
  $

  	
  8.88

  	
   

  	
  $

  	
  9.15

  	
   

  	
  $

  	
  9.42

  	
   

  	
  $

  	
  9.70

  	
   

  	
  $

  	
  9.99

  	
   

  
	
  2.341 - 2.405

  	
   

  	
  $

  	
  8.94

  	
   

  	
  $

  	
  9.21

  	
   

  	
  $

  	
  9.48

  	
   

  	
  $

  	
  9.77

  	
   

  	
  $

  	
  10.06

  	
   

  
	
  2.406 - 2.470

  	
   

  	
  $

  	
  9.00

  	
   

  	
  $

  	
  9.27

  	
   

  	
  $

  	
  9.55

  	
   

  	
  $

  	
  9.83

  	
   

  	
  $

  	
  10.13

  	
   

  
	
  2.471 - 2.535

  	
   

  	
  $

  	
  9.06

  	
   

  	
  $

  	
  9.33

  	
   

  	
  $

  	
  9.61

  	
   

  	
  $

  	
  9.90

  	
   

  	
  $

  	
  10.20

  	
   

  
	
  2.536 - 2.600

  	
   

  	
  $

  	
  9.12

  	
   

  	
  $

  	
  9.39

  	
   

  	
  $

  	
  9.68

  	
   

  	
  $

  	
  9.97

  	
   

  	
  $

  	
  10.26

  	
   

  
	
  2.601 - 2.665

  	
   

  	
  $

  	
  9.18

  	
   

  	
  $

  	
  9.46

  	
   

  	
  $

  	
  9.74

  	
   

  	
  $

  	
  10.03

  	
   

  	
  $

  	
  10.33

  	
   

  
	
  2.666 - 2.730

  	
   

  	
  $

  	
  9.24

  	
   

  	
  $

  	
  9.52

  	
   

  	
  $

  	
  9.80

  	
   

  	
  $

  	
  10.10

  	
   

  	
  $

  	
  10.40

  	
   

  
	
  2.731 - 2.795

  	
   

  	
  $

  	
  9.30

  	
   

  	
  $

  	
  9.58

  	
   

  	
  $

  	
  9.87

  	
   

  	
  $

  	
  10.16

  	
   

  	
  $

  	
  10.47

  	
   

  
	
  2.796 - 2.860

  	
   

  	
  $

  	
  9.36

  	
   

  	
  $

  	
  9.64

  	
   

  	
  $

  	
  9.93

  	
   

  	
  $

  	
  10.23

  	
   

  	
  $

  	
  10.53

  	
   

  
	
  2.861 - 2.925

  	
   

  	
  $

  	
  9.42

  	
   

  	
  $

  	
  9.70

  	
   

  	
  $

  	
  9.99

  	
   

  	
  $

  	
  10.29

  	
   

  	
  $

  	
  10.60

  	
   

  
	
  2.926 - 2.990

  	
   

  	
  $

  	
  9.48

  	
   

  	
  $

  	
  9.76

  	
   

  	
  $

  	
  10.06

  	
   

  	
  $

  	
  10.36

  	
   

  	
  $

  	
  10.67

  	
   

  
	
  2.991 - 3.055

  	
   

  	
  $

  	
  9.54

  	
   

  	
  $

  	
  9.83

  	
   

  	
  $

  	
  10.12

  	
   

  	
  $

  	
  10.42

  	
   

  	
  $

  	
  10.74

  	
   

  
	
  3.056 - 3.120

  	
   

  	
  $

  	
  9.60

  	
   

  	
  $

  	
  9.89

  	
   

  	
  $

  	
  10.18

  	
   

  	
  $

  	
  10.49

  	
   

  	
  $

  	
  10.80

  	
   

  
	
  3.121 - 3.185

  	
   

  	
  $

  	
  9.66

  	
   

  	
  $

  	
  9.95

  	
   

  	
  $

  	
  10.25

  	
   

  	
  $

  	
  10.56

  	
   

  	
  $

  	
  10.87

  	
   

  
	
  3.186 - 3.250

  	
   

  	
  $

  	
  9.72

  	
   

  	
  $

  	
  10.01

  	
   

  	
  $

  	
  10.31

  	
   

  	
  $

  	
  10.62

  	
   

  	
  $

  	
  10.94

  	
   

  
	
  3.251 - 3.315

  	
   

  	
  $

  	
  9.78

  	
   

  	
  $

  	
  10.07

  	
   

  	
  $

  	
  10.38

  	
   

  	
  $

  	
  10.69

  	
   

  	
  $

  	
  11.01